BoG announced that in the framework of the resolution measures prescribed in the relevant law (4021/2011), it has explored the potential interest of local and foreign banks for the acquisition of the sound part of ATEbank (90% owned by the Greek state). This part comprises mainly the performing loans and securities portfolio, as well as the full amount of all of the bank’s deposits.
BoG also noted that it proceeded to transfer the sound part of ATEbank to Piraeus Bank following the latter’s offer, which has been approved by HFSF. As prescribed by law, the difference (€6.7bn) between the transferred assets (€14.7bn) and liabilities (€21.4bn) is being covered by HFSF, through EFSF bonds, which cannot be liquidated, yet can be used for Eurosystem funding. HFSF will also contribute €0.5bn to the new entity to restore its pro-forma Q1’12 capital adequacy ratio >8%.
According to BoG announcement, the license of ATEbank has been revoked. For the non- performing loans, backed by agricultural land as collateral that will not be transferred to Piraeus Bank, there will soon be special legal provision. Also, the subsidiaries that will not be transferred will be taken over and managed by the Greek State. BoG stressed that with the procedure that has been implemented, the deposits of all customers are secured in their entirety and the smooth continuation of business is ensured.
Piraeus noted in a separate press release that it ensures all job positions of ATEbank, while starting on July 30 the whole branch network of ATEbank will operate within Piraeus Bank entity, while maintaining ATEbank commercial brand name. Piraeus announcement also points out that the new entity’s assets stand at €74bn, deposits at €35bn and net loans at €44bn compared to €47.5bn, €20.9bn and €34.1bn respectively for Piraeus Bank in Q1’12, implying that the sound part of ATEbank added €14.3bn of deposits and €10.6bn of net loans, while new entity’s total assets were further boosted by the €4.7bn (from the initial allocation of €18bn to top-4 banks) plus €0.5bn from HFSF. The transaction consideration stands at €95bn, while Piraeus estimates that €194m pre-tax total synergies in a 3-year period, while integration costs are expected at c134% of cost synergies over 3 years. I would also highlight that Piraeus significantly improves its deposit base, while pro-forma loan-to-deposit ratio eases to 124% from 158% before (Piraeus standalone).
Overall, a positive development for the government, and even more positive for Piraeus, while the transaction could become the first step towards a restructuring of the domestic banking system paving the way for further consolidation in the coming months, particularly regarding state-controlled banks (Hellenic Postbank) and Greek subsidiaries of French banks (Emporiki Bank and Geniki Bank). Note that National Bank and Eurobank have already officially expressed their interest in Emporiki Bank. Furthermore, Piraeus becomes the second largest banking group in the Greek market in terms of assets and deposits, yet this higher ranking may be temporary, as potential upcoming developments may alter the landscape of the domestic banking system.